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Cumulative cap
       
 
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Cumulative cap

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Cumulative cap
A cumulative Interest rate Cap protects against increases in total Interest Expense over a specified period of time. This period of time Will incorporate several rate settings in determining the final Interest Expense (for example, four three-month Libor settings for an annual Interest Expense amount). This differs from a standard Cap, which caps an absolute rate of Interest in each calculation period. Because a cumulative Cap does not provide the period-to-period protection of a standard Cap, it is generally cheaper than the corresponding standard Cap.
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